September 2002

A few years ago, thousands of the nation's gas stations closed shop when they were unable to handle the cost of meeting the Environmental Protection Agency's deadline for the cleanup or removal of substandard underground storage tanks. The lesson taught by this nationwide phenomenon is that the EPA is getting tougher about its rules and its deadlines and is, more than ever before, willing to stand firm on policies, even if consequences mean negative economic impacts.

Now another EPA deadline looms, and this time it is municipal governments that will be impacted. March 10, 2003, is the deadline for small municipalities to apply for Phase II National Pollutant Discharge Elimination System (NPDES) permits. It may seem like there's still plenty of time, but the application process is complex and many smaller municipalities don't have the resources in place to handle the application process at the last minute.

Controlling water pollution
NPDES permitting controls water pollution by regulating point sources that discharge pollutants into waters. The process applies to, among other things, the operators of Municipal Separate Storm Sewer Systems (MS4s). Stormwater has a nasty habit of stripping pollutants from the ground and distributing them, eventually, into waterways. Any farmer who has dealt with runoff of pesticides or fertilizers during a rainstorm can attest to the rural phenomenon, but in cities, stormwater most often pollutes waterways via storm sewer systems. Unlike a point source such as a pipe from an industrial plant that discharges pollutants into a waterway, stormwater is nebulous. It can create a pollution problem anywhere, at any time. Thus, any cloudburst has the potential to turn an area lake, river or pond into a contaminated waterway unsafe for fishing, swimming and other activities. Of course, many communities also depend on local waterways as a source for safe drinking water. In 1993, more than fifty Milwaukee residents died from drinking cryptosporidium-contaminated water from Lake Michigan after a period of heavy rainfall.

Phase II requirements
Phase II applies to all "regulated small MS4s." A "small" MS4 serves a population of less than 100,000. Medium MS4s (populations between 100,000 and 249,000) and large MS4s (populations of 250,000 or greater) have already had to meet Phase I NPDES permit requirements. Some small MS4s were also covered by Phase I due to their interrelationship to other medium or large MS4s.

A "regulated" small MS4 generally is one that is located within the boundaries of a Census Bureau-designated "urbanized area"â€”a residential population of at least 50,000 and an overall population density of at least 1,000 people per square mile. However, small rural MS4s meeting certain population thresholds outside of an urbanized area may also be regulated if they have discharges with the potential of impacting water quality, or if they are physically interconnected with an MS4 that is itself regulated by the NPDES stormwater program.

Regulated small MS4s will be required by Phase II to implement six minimum control measures:

Public education and outreach on stormwater impacts

Public involvement/participation

Illicit discharge detection and elimination

Construction site stormwater runoff control

Post-construction stormwater management in new development and redevelopment

Pollution prevention/good housekeeping for municipal operations

The breakdown of potentially required tasks entailed in these six minimum control measures shows that cities are faced with a litany of responsibilities. However, analysis of requirements and municipal systems has illuminated numerous potential cost-cutting measures, including having stormwater staff perform other non-stormwater duties or be part-time staff; making existing office space and facilities available to stormwater staff; and having existing city legal staff provide required legal support.

Other factors that could help reduce program costs include:

Use of existing staff to perform staff functions (i.e., no new staff)

Use of public involvement materials from Phase I efforts of larger cities

Use state agency or EPA enforcement in lieu of municipal enforcement

Resource sharing with other Phase II cities

Coordination of new development programs with EPA's effluent guidelines program

Coordination of mapping requirements with GASB 34 requirements

Potential compliance headaches
NPDES permitting and overall compliance with the CWA can create potential headaches for city managers and other responsible departments. In 1995, for example, then-Dallas mayor Steve Bartlett testified to a hearing by the House of Representatives Subcommittee on Water Resources and Environment: "The Clean Water Act...is a series of mandates and costs. The fact is that the whole area is a series of rather costly mandates." And a series of regulatory nightmares, Bartlett added, saying: "We spend most of our time complying with federal and state law."

These frustrations are not just "big city" problems. The 2000 Census revealed that the majority of growth is taking place in smaller communities on the fringes of major metropolitan areas. As these communities develop, an unfortunate side effect of growth is an increase in the opportunities for water pollution by stormwater runoff from development and construction sites and what the EPA calls "impervious surfaces": paved roads, parking lots, building roofs, etc. It is a basic sociological truth that as settlements grow in population, they pollute more. So how can a municipality, faced with a burgeoning population, meet impending EPA deadlines for the implementation of a stringent method of water pollution control?

The EPA has estimated that small municipalities can complete the Phase II permit application with about 40 hours of effortâ€”this, of course, after the colossal effort of planning an NPDES-compliant MS4. The initial application will likely take the form of a general permit notice of intent (NOI) similar to the NOI forms used by regulated Phase I construction and industrial activities.

The EPA also estimates that annual permit costs for small, regulated municipalities will average about $9.16 per household. For a city with a population of about 30,000, five-year permit costs could approach about $100,000 per year according to the EPA's studies.

However, the EPA has sometimes initially underestimated permit compliance costs. For example, the agency severely underestimated both the permit application and implementation costs to Phase I cities. The Phase II estimates appear closer to the mark, but they still appear to be low.

No city leaders want to burden their municipalities' residents with unreasonably high utility bills or property taxes to help cover these costs. On the other hand, no city leaders want their residents' health to be adversely affected because of high levels of pollution in local waters. The NPDES Phase II permitting process, while daunting, is navigable for smaller municipalities searching for ways to reduce the financial burden of implementing and operating a safe and compliant MS4.

How to pay for Phase II?
With Phase II compliance costs potentially ranging into six figures or more per year, many client cities have opted to implement a stormwater utility to pay for these costs. Simple in concept, a stormwater utility charges residents and business activities a monthly or annual user fee for stormwater service, based on the resident's or business' contribution to runoff within the municipality. Fees range from less than a dollar per month for homeowners to several hundred dollars per month for the largest commercial activities.

Even a basic utility can usually easily fund NPDES compliance costs. Better-funded utilities often fund other more traditional flood control or drainage costs as well.

Implementation can range from simple or complex, depending on the utility billing and property databases available to the city, as well as the selected rate method.

Even the most complex city can implement a stormwater utility quickly if desired. For example, the City of Dallasâ€”assisted by Carter & Burgessâ€”implemented a utility with more than 250,000 customer accounts in about three months.

Small MS4s that serve an urbanized area with a population of at least 50,000 and a population density of at least 1,000 people per square mile

Small MS4s outside of an urbanized area with discharges that have the potential of impacting water quality

Small MS4s outside of an urbanized area that are interconnected to regulated MS4s

What is the deadline for permit application?
March 10, 2003

Who manages the permit process?
Regulated entities should contact their NPDES permitting authority, which will be either their state or EPA Regional Office, depending on the type of entity and its location.

What is an MS4?
An MS4 can include virtually any form of publicly-owned storm sewer system, including cities, military facilities, airports and university campuses.